Absolute Disclosure Requirement Under Integrity Pact Section 3: Non-Disclosure of Past Transgressions Vitiates Public Tenders

1. Introduction

In M S Deepak & Co. v. IRCTC & Anr. (W.P.(C) 6460/2024), the Delhi High Court dealt with a challenge under Article 226 of the Constitution to a Letter of Award (LoA) issued by the Indian Railway Catering and Tourism Corporation (IRCTC) to a rival bidder (Respondent 2) for onboard catering and base-kitchen services. The petitioner, a partnership firm already providing train-catering services, alleged two principal infirmities in the process: (i) the winner’s “Integrity Pact” annexure lacked witness signatures at bid-opening yet was later regularized after the financial bids were opened; and (ii) the winner failed to disclose its ongoing criminal proceedings—alleged anti-corruption transgressions—contrary to the Central Vigilance Commission’s Standard Operating Procedures (SOP).

2. Summary of the Judgment

The Court upheld that permitting a bidder to correct missing witness signatures in its Integrity Pact after financial bids were opened did not breach the tender’s strict criteria—relying on Sankalp Recreation Pvt. Ltd. v. Union of India. More critically, the Court held that:

Section 3 of the Integrity Pact (disqualification for any anti-corruption transgression “before award or during execution”) stands independently of Section 5’s three-year limitation on prior transgressions.
By failing to disclose its criminal cases (registered over three years earlier but still pending), Respondent 2 prevented IRCTC from assessing its reliability and credibility under Section 3.
The omission vitiated the fairness of the tender process; the LoA dated 17.04.2024 was quashed.
IRCTC was directed to re-invite bids and complete the fresh tender within three months, while letting the incumbent continue operations in the interim.

3. Analysis

3.1. Precedents Cited

Sankalp Recreation Pvt. Ltd. v. Union of India – Integrity Pact deficiencies (witness signatures) can be regularized pre-award without rejecting the bid.
Damodar Valley Corporation v. BLA Projects Pvt. Ltd. – Section 3 (unlimited disqualification for transgressions) must not import Section 5’s three-year temporal bar.
Agmatel India Pvt. Ltd. v. Resoursys Telecom – Courts must defer to the tender-author’s interpretation when it is consistent with the document’s language.
Haffkine Bio-Pharmaceutical Corp. v. Nirlac Chemicals – Violations of CVC guidelines can vitiate tender opening and process.
G.J. Fernandez v. State of Karnataka – Post-bid regularization, if not prejudicial, need not be set aside unless fairness is compromised.

3.2. Legal Reasoning

Section 2(g) imposed on bidders a duty to “disclose any transgressions” that might impinge on anti-corruption principles. Section 3 separately empowered IRCTC to disqualify any bidder who, “before award or during execution,” committed a transgression or otherwise put its reliability/credibility in question. Section 5 created a self-declaration requirement limited to transgressions in the last three years, with non-disclosure punishable by disqualification.

The Court held that:

Section 3 and Section 5 serve different functions: the former covers all past and ongoing transgressions without a temporal cutoff; the latter imposes a three-year self-declaration obligation.
There is no textual basis to read Section 5’s “three-year” limit into Section 3. Section 3’s broader scope protects the tender’s integrity by ensuring full disclosure of any anti-corruption risk, regardless of age.
Respondent 2’s non-disclosure of its criminal proceedings prevented IRCTC from exercising its Section 3 discretion to evaluate the bidder’s credibility, rendering the award process unfair and arbitrary.

3.3. Impact

This decision clarifies that public tenders incorporating an Integrity Pact may disqualify any bidder on grounds of anti-corruption transgressions without limiting the inquiry to incidents within a fixed term. Tender-scribes and bidders must now recognize:

Integrity Pact Section 3 creates an unbounded duty of disclosure—any known or pending anti-corruption proceeding must be disclosed.
Temporal carve-outs (e.g., three years) in separate clauses cannot dilute or restrict Section 3’s broad remedial sweep.
Failure to disclose any material misconduct precludes a fair evaluation and vitiates the award, even if subsequent minority quirks (like missing witness signatures) could be regularized.

4. Complex Concepts Simplified

Letter of Award (LoA) – Formal communication awarding the contract to the successful bidder.
Integrity Pact – A pre-contract agreement banning corrupt practices; Annexure G in this tender.
Section 3 vs. Section 5 –
- Section 3: Disqualification for any anti-corruption transgression without time limit.
- Section 5: Self-declaration limited to transgressions in the prior three years.
Techno-commercial vs. Financial Bid – Bids are evaluated first for technical and compliance criteria (techno-commercial) before opening price proposals (financial).
Article 226 – Jurisdiction empowering High Courts to issue writs for enforcing fundamental rights or for any other purpose.

5. Conclusion

The Delhi High Court has underscored the paramount need for complete transparency in public procurement. By separating the broad, unbounded disclosure mandate of Integrity Pact Section 3 from the three-year self-declaration window in Section 5, the Court ensured that no bidder can hide material anti-corruption proceedings, however old. Failure to disclose such information vitiates the tender process, demands rescission of the award, and compels re-tendering. This ruling reinforces best practices of fairness and accountability in government contracts and sets a binding precedent for all future Integrity Pact interpretations.